Double entry Practice Questions PDF

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MN10668 Fundamentals of Accounting Double entry Practice Questions...

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Double entry Practice Questions There are 15 Questions Try to work through each question to understand which answer is correct.

Q1. Which of these accounts will be increased by a credit? a) Plant and equipment b) Trade Payables c) Trade Receivables d) Selling and Distribution Costs Q2. What transaction is represented by the following entries? Dr Bank Cr Trade Receivables a) b) c) d)

The purchase of goods on credit from a supplier Receipt of a cheque from a credit customer The sale of goods on credit to a customer Payment by cheque to a credit supplier

Q3. Which of the following is not an error? a) Interest received is credited to the bank and debited to the interest account b) A sale is debited to Sales and credited to Trade Receivables c) Inventory purchases are debited to non-current assets and credited to the Trade Payables account. d) An increase in the estimate of the uncollectible trade receivables is debited to Selling & Distribution Costs and credited to Provision for Bad Debts Q4. Which of the following entries are correct? Debit

Credit

(1) Sold goods on credit

Sales

Receivables

(2) Bought non-current asset for cash

Purchases

Cash

(3) Deposit cash at bank

Bank

Cash

(4) Reverse accrual

Accruals

Expense

a) b) c) d)

(1) and (2) only (2) and (3) only (3) and (4) only (1) and (4) only

Q5. U18 Ltd’s business accounts show net assets of £102,000 at 1 July 2014. Six months later, at 31 December 2014, the net assets of the business are calculated as £135,000. Which of the following combinations of profit/loss for the period and capital change would account for the movement in net assets during this period? a) Profit of £23,000; Drawings £10,000 b) Loss of £25,000; Drawings £8,000 c) Profit of £18,000; Capital introduced £15,000 d) Loss of £5,000; Capital introduced £33,000

Q6. Before settling their invoice, you return goods worth £1,025 that you bought on credit from MN Ltd.. Which of the following represents the double entry to record this in your books? a) b) c) d)

Dr MN Ltd. trade payable £1,025; Cr Returns out £1,025 Dr MN Ltd. trade payable £1,025; Cr Purchases £1,025 Dr MN Ltd. trade payable £1,025; Cr Returns in £1,025 Dr MN Ltd. trade payable £1,025; Cr Sales £1,025

Q7. A supplier sends you a statement showing a balance outstanding of £9,800. Your own records show a balance outstanding of £8,900. Which of the following does not explain the difference? a) You have returned goods worth £900 which the supplier has not yet accounted for b) The supplier sent an invoice for £900 which you have not yet received c) You have paid the supplier £900 which she has not yet accounted for d) The supplier has allowed you a £900 cash discount which you had omitted to enter in your ledgers Q8. A non-current asset was acquired and installed on 1.6.X6. The asset itself cost £100,000 and its installation cost a further £20,000. At that time it was assumed that the asset would have no residual value and it was decided to depreciate it using the reducing balance method at a rate of 50% per annum. If the asset is sold on 1.6.X9 for £35,000, what profit or loss would arise on disposal? a) b) c) d)

Loss of £65,000 Loss of £70,000 Profit of £20,000 Profit of £70,000

Q9. On 31 December the following balances existed in an entity's books: Trade receivables £90,000 (debit), bad debts written off £20,000 (debit), provision for doubtful debts £15,000 (credit). The entity requires a provision for doubtful debts to be made of 15% of the trade receivables. It should: a) Dr Provision for doubtful debts £1,500; Cr Selling and distribution £1,500 b) Dr Selling and distribution costs £4,500; Cr Provision for doubtful £4,500 c) Dr Selling and distribution costs £1,500; Cr Provision for doubtful £1,500 d) Dr Provision for doubtful debts £4,500; Cr Selling and distribution £4,500

Q10. Which of the following accounts will not be decreased by a credit? a) Trade Receivables

costs debts debts costs

b) Electricity Expense c) Purchases d) Long-term Loan Q11. The ABC Co. commenced business on 1.1.X4. At 30.6.X5 its trial balance was as follows: Debit £000s Capital Retained profit at 1.7.X4 Cash Non-current assets Bank loan due to 1.8.X5 Administrative expenses Selling expenses Trade payables Inventories Accruals Prepayments Sales revenue Trade receivables Cost of sales

Credit £000s 100 14

12 104 25 16 11 24 56 8 11 94 32 23 265

265

What will be the profit for the year ended 30.6.X5 per the Income Statement? a) b) c) d)

£41,000 £44,000 £47,000 £58,000

Q12. Looking at the same trial balance from question 11, what is the most likely total for current liabilities in the Statement of Financial Position? a) b) c) d)

£71,000 £68,000 £57,000 £46,000

Q13. At the beginning of its accounting year, 1.1.X6, a business had an accrual brought forward for telephone expenses of £350. During the year it received telephone bills covering the period 1.11.X5 to 31.10.X6 totalling £7,560 of which £6,150 had been paid by 31.12.X6. After making an accrual of £500 for the last two months of 20X6, what is the total of accruals and payables in respect of telephone expense at 31.12.X6? a) £910

b) £1,260 c) £1,560 d) £1,910 Q14. RS Ltd. has paid rent on its business premises quarterly in advance from 1.8.X7. Initially, the rent was £48,000 per annum but is increasing to £60,000 per annum on 1.8.X8. At its first accounting period end, 30.6.X8, the rent prepayment will be represented by which of the following balances? a) b) c) d)

£4,000 debit £4,750 debit £4,000 credit £4,750 credit

Q15. PQ’s draft trial balance at 31.12.X8 does not balance – the total of credit balances exceeds that of debit balances by £ 2,430. Which of the following might explain the difference? a) A purchase on credit for £4,230 was instead recorded as being for £2,430. b) A credit sale for £1,215 was credited to Selling expenses rather than the Sales revenue account. c) No recordings in the books were made regarding a sale of goods on credit for £1,215. d) A depreciation charge of £1,215 in respect of a car was deducted from the Motor Vehicles non-current asset account and added to the provision for depreciation....